Financial Markets…Global equities started December on a cautious note, after they outperformed other global assets for a third month in November, as disappointing economic figures from France and Spain, heightened geopolitical risk in Ukraine and Thailand, lingering territorial dispute in the South China sea offset signs of strengthening manufacturing activity in China, the U.K., and Germany. An encouraging reading on China’s factory activity got the nation’s stock markets off to a relatively strong note, but later lost ground after a relaxation of 14-month ban on IPOs prompted fears about a flood of supply that could divert funds from existing stocks. Meanwhile, Europe’s Stoxx 600 stock index declined 0.2% in afternoon trading with national benchmark indexes retreating in 15 of the 18 western European markets. U.S. equities also opened lower with the S&P 500 and the Dow Jones Industrial Average sliding 0.2% and 0.3%, respectively.

The euro fell against the dollar and touched an 11-month low versus the British pound on Monday after manufacturing data underlined the ongoing division among Euro-zone economies. The common shared currency depreciated 0.5% to $1.3516 on Monday, dropping from Friday’s one-month high of $1.3622. And the euro fell against the pound to 82.53, the weakest level since early January. Meanwhile, the yen continued to weaken after depreciating more than 4% last month versus the dollar and euro as Japan’s currency has been under strong selling pressure amid rising investors’ risk appetite.

High Income Economies…The final Markit U.S. Manufacturing Purchasing Managers’ Index (PMI) was up sharply from 51.8 in October and registered 54.7 in November, signaling the strongest improvement in manufacturing business conditions since January. Manufacturing production increased at the sharpest pace for 20 months, while new order growth was strong and accelerated to one of the fastest rates for over one-and-a-half years, and employment increased for the fifth consecutive month.
Similarly, the U.S. Institute of Supply Management (ISM) PMI increased from October's reading of 56.4 to 57.3 for November, the highest reading since November 2011. The ISM's New Orders Index increased by 3.0 to 63.6 and the Production Index increased by 2.0 to 62.8 percent.

The final Eurozone Manufacturing PMI edged up from 51.3 in October and the earlier flash estimate of 51.5, to 51.6 in November, its highest since June 2011. Output, new orders and new exports expanded for the fifth successive month, manufacturing employment continues to slide. PMIs for Germany, Italy, the Netherlands, Austria and Ireland all signaled expansion in November, with the rates of increase accelerating in all bar Ireland, while those for France, Greece and Spain signaled contractions.
The HSBC Manufacturing PMI for Russia fell from 51.8 in October to 49.4 in November, signaling a slight overall deterioration in operating conditions in the Russian manufacturing sector. The decline mainly reflected much slower increases in output and new orders, and a faster drop in employment.

The HSBC South Korea Manufacturing PMI rose marginally to 50.4 in November, up from 50.2 in October, signaling a slight improvement in operating conditions, was nevertheless the highest reading in six months. Output growth slowed to virtual stagnation in November, the sub-Index posted above the 50.0 no-change mark for the second successive month, following a four-month sequence of contractions. Increased smartphone sales and improvements in the automobile industry due to the settlement of strikes are the likely key drivers. Conversely, new export orders grew at a solid pace, though the rate of growth eased from October’s 31-month high.

Developing Economies…East Asia and the Pacific: Indonesia’s headline inflation, measured by the consumer price index, increased slightly in November, rising to 8.4% (y/y) from 8.3% in October. All components of the CPI contributed to the November’s increase with the largest contributions coming from the costs of transportation and communication, which increased at the annual rate of 15.0%, followed by the costs of food products which rose, 12.2%. Month-on-month, the CPI rose 0.12% in November, up from 0.09% in October. Core inflation increased to 4.8% from 4.7% in October.

Europe and Central Asia: Factory activity in Turkey accelerated in November, propelled by rapid growth in new orders and production. The HSBC Manufacturing Purchasing Manager’s Index rose to 55.0 in November from 53.3 in October, the sharpest increase since March 2011. Adding to the increase in new orders and production, employment levels also continue to expand in the manufacturing sector.

Latin America and the Caribbean: Brazil’s HSBC Manufacturing Purchasing Manager’s Index fell in November to 49.7 from 50.2 in October, reflecting a decline in demand. Manufacturing production increased but new orders continued to fall, declining for the fifth consecutive month. Input price pressures increased, reflecting rising import costs; output prices also rose, while employment levels continue to fall.

South Asia: India’s HSBC Purchasing Managers’ Index for the manufacturing sector increased above the 50 no-change mark in November for the first time since July. Driven by an increase in new domestic orders, the HSBC manufacturing PMI rose to 51.3 in November from 49.6 in October. Manufacturing production increased for the first time in seven months and new work intakes also rose after contracting for five months; while export business increased marginally.

Data also show that India’s economy expanded at a faster pace in the third quarter. GDP grew at the annualized rate of 4.8% (y/y) in Q3, up from 4.4% in Q2 driven by increased output in agriculture and construction. Supported by increased production of cereals, pulses and oilseeds, agriculture production rose 4.6% (y/y); while construction output increased by 4.3%, up from 2.8% in Q2. In addition, the manufacturing sector grew by 1% after contracting in Q2. Mitigating these improvements, the mining sector contracted for the second straight quarter albeit at a slower pace than in Q2.

Sub-Saharan Africa: South Africa’s manufacturing growth strengthened in November for the second month in a row. The seasonally adjusted Kagiso Purchasing Managers’ Index climbed to 52.4 in November from 50.7 in October. All five sub-components of the PMI increased, signaling a recovery in manufacturing production from the sharp contraction recorded in Q3.